The Securities and Exchange Commission recently filed an injunction alleging David L. Rothman, Vice President and minority owner of conducted a fraud by issuing false account statements and misappropriating investor funds.
The SEC alleges that from 2006 to 2011, Rothman created and issued false account statements to certain elderly and unsophisticated investors that materially overstated the value of their investment accounts.
"By issuing false account statements, Rothman at times exaggerated these customers' returns and at other times concealed the fact that their account values were in decline. As a result, Rothman was able to maintain his business relationship with these customers and he continued to earn compensation from the investment products he sold to them."
The SEC further alleges when the investors discovered Rothman had misrepresented the value of their investments, Rothman concocted a scheme to conceal his conduct by agreeing to pay the investors the returns he reported on the false account statements in return for their silence on the matter.
The SEC claims when Rothman could no longer afford to make those payments, he misappropriated funds from another elderly and unsophisticated investor and from two trust accounts for which he serves as trustee.
The complaint filed by the SEC said Rothman used a substantial portion of the misappropriated funds for his own personal benefit.
Financial-Planning.com reports Ted Rothman, David's father and part owner of the investment firm headquartered on Street Road, declined to comment on the SEC allegations, saying he didn't know anything about it.
The SEC alleges that Rothman violated multiple sections of the Securities and Exchange Act and said the investigation into the matter is ongoing.
The complaint seeks a permanent injunction, restitution with interest as well as civil penalties from Rothman.
Criminal charges have also been filed against Rothman in a parallel criminal case.